Presented by the OECD Science, Technology and Industry Directorate at the OECD Southeast Asia Regional Forum, 24-26 March 2014, Bali, Indonesia.

1. OECD WORK ON
INNOVATION AND
SOUTHEAST ASIA
OECD ROUNDTABLE ON INNOVATION POLICY IN SOUTHEAST
ASIA, BALI, 24 MARCH 2014
Molly Lesher, Counsellor,
OECD Directorate for Science, Technology and Industry

2. • OECD work on innovation generally
• Highlights of OECD work on innovation in
Southeast Asia
– Regional review
– IP framework
– Inclusive innovation
• How can OECD help Southeast Asia
achieve its innovation policy goals?
Overview

3. Innovation in science, technology and industry
• Since 2005, the OECD has undertaken a
demand-driven programme of Country
Reviews of Innovation Policy.
 Completed: Luxembourg, Switzerland, New
Zealand, South Africa, Chile, Norway, China,
Hungary, Korea, Greece, Mexico, Russian
Federation, Peru, Slovenia, Sweden
 Recently completed: Colombia, Croatia,
Vietnam, Southeast Asia
 On-going: France, Netherlands
 Upcoming: Malaysia
• Scope: Comprehensive analysis of the
respective national innovation system (with
a focus on the role of government policy)
See: www.oecd.org/sti/innovation/reviews

4. The policy domains covered by the reviews
Framework conditions for innovation
(Functioning of markets, regulation, corporate governance,
education, communication infrastructures, etc.)
Science, technology and innovation policy
Policies to
support
investment
in science &
R&D
Policies to
strengthen
linkages within
innovation
systems
Demand-side measures
Supply-side measures
e.g. Procurement policies
e.g. R&D tax incentives
Grants
e.g. Public-private
partnerships
e.g. Promotion
of innovation
in SMEs
Policies to
enhance
innovation
competencies
of firms

5. Innovation in science, technology and
industry (continued)
• Innovation for development
• Contribution of innovation to economic growth and well-being;
• Impact of globalisation on development and innovation;
• Inclusive innovation;
• Education, skills and human capital;
• ICTs for development; and
• Institutional frameworks for innovation policy.
• Inclusive innovation
Exploring ways to leverage innovation to address high rates of social exclusion
and poverty.

6. • Science, technology and industry working papers
Cover a broad range of topics including definition and measurement of
science and technology indicators, global value chains, and research on
policies to promote innovation.
• Innovation Policy Platform (IPP)
Web-based tool providing state-of-the-art information
relevant to STI policymaking, including statistics, case studies and policy
briefs: www.innovationpolicyplatform.org.
• Innovation strategy
Ministerial Mandate (May 2007): Boosting innovation to
promote sustainable growth. Final report delivered to the
OECD Ministerial in 2010.
Innovation in science, technology and
industry (continued)

7. Valuecreation
Activities
Source: Based on Shih (1992), Dedrick and Kraemer (1999), and Baldwin (2012).
R&D
Design
Logistics
Production
Marketing
Services
Boosting innovation helps countries
move up the value chain
Logistics

8. OECD work on measuring trade in value
added and GVCs is extensive
TiVA database
covers 58
countries,
including
Southeast Asia
• oe.cd/tiva
• oe.cd/gvc

9. OECD also produces indicators of
science, technology and industry

10. OECD Review of Innovation in
Southeast Asia
• This review is the first OECD
innovation mapping of science,
technology and innovation (STI)
developments in a trans-national region
• The review assesses the STI capabilities,
and analyses the strength, weaknesses,
opportunities and threats through
detailed country profiles of Cambodia,
Indonesia, Malaysia, Singapore,
Thailand, and Vietnam
• It represents a first step in better
understanding the innovation policy
setting in Southeast Asia

11. Framework conditions for innovation:
Infrastructure
• Infrastructure can both carry and enable innovation
• Lack of basic infrastructure is an issue in parts of the region, although some
higher income countries have made impressive strides in developing their
infrastructure over the last 30 years
Internet users as a percentage of
the population (2011) (ITU)
Percentage of population without electricity, 2009
(World Bank)
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80

12. Framework conditions for innovation: Regulation
(World Bank “Doing Business” indicators for start-ups)
2013
Rank
Procedures
(number)
Time (days)
Cost (% of income
per capita)
Paid-in Min. Capital
(% of income per
capita)
2004 2013 2004 2013 2004 2013 2004 2013
Singapore 4 7 3 8 3 1 0.6 0 0
Hong Kong, China 6 5 3 11 3 2.4 1.9 0 0
Chinese Taipei 16 8 3 48 10 5.9 2.4 210.8 0
Korea 24 10 5 17 7 18.4 14.6 347.7 0
Malaysia 54 10 3 37 6 33.1 15.1 0 0
Laos 81 7 6 153 92 23.9 7.1 32.1 0
Thailand 85 8 4 33 29 8 6.7 0.4 0
Viet Nam 108 12 10 59 34 31.9 8.7 0 0
Japan 114 11 8 31 23 10.7 7.5 74.9 0
China 151 13 13 48 33 17.8 2.1 1,236.50 85.7
Philippines 161 17 16 49 36 28.6 18.1 2.3 4.8
Indonesia 166 12 9 168 47 136.7 22.7 69.1 42
India 173 11 12 89 27 53.4 49.8 428 140.1
Cambodia 175 11 9 94 85 534.8 100.5 438.9 28.5

13. Human capital for
innovation
PISA Educational Attainment of 15-year olds, 2009
(OECD, 2011)
0
100
200
300
400
500
600
Mathematics Science
TIMSS Science and Mathematics Scores of Eighth-
Grade Students, 2007
Secondary Gross Enrolment Rates (2010
or nearest year) (Source: World Bank)
• Many skills sets
important for innovation
• At the basic level, adult
literacy rates are high in
most SEA countries
• Secondary enrolment
rates are more mixed;
engineering skills are
particularly important in
catching-up, but remain
under-developed
• TIMSS and PISA 2009
Plus results indicate
performance in
mathematics and science
0
10
20
30
40
50
60
70
80
90
250
300
350
400
450
500
550
600
Reading Mathematics Science
Malaysia OECD average Singapore Japan Korea Hong Kong, China

14. Tertiary education
• Tertiary education – both in
academic and vocational skills – is
essential for technological
upgrading
• Enrolment rates in tertiary
education vary significantly within
the region with the level of
development, with Thailand,
Malaysia in the leading group
• Reflecting the state of
development in many countries,
the proportion of public
expenditure on tertiary education
from education budgets tends to
be rather low. Singapore and
Malaysia are leading in the region
on these terms
Tertiary Gross Enrolment Rates (2010 or nearest
year) (Source: UNESCO)
Percentage of public expenditure on
education devoted to the tertiary level
(2010 or nearest year) (Source:
UNESCO)
0
5
10
15
20
25
30
35
40
0
10
20
30
40
50
60

15. Southeast Asia’s
Innovation Policy Challenges
• Framework conditions for innovation
• Infrastructure
• Relatively low overall investment in S&T and
innovation
• Indigenous innovation capabilities remain
relatively weak overall in the majority of
countries (compared to 1st generation East
Asian “Tiger economies”: Korea et al.)
• Lack of regional or global brands

16. IP, innovation and development
• A new framework that
identifies strengths and
weaknesses in the IP system
from the perspective of
contributions to national
innovation performance
• The framework has been
applied to Indonesia (2014)

17. Critical dimensions in the IP framework
Organisation of IP systems and “legal
quality”
Taking into account development
challenges
Access to a wider group of users
Putting IP policies into the wider
innovation context

18. Recommendations to enhance
Indonesia’s IP system
 Improve the quality of the IP system via legal and
administrative reforms
 Institute policies to include smaller entities and
businesses in remote geographic areas (high potential
gain from use of IP)
 Remove barriers that inhibit public research institutes
from playing a larger role in the innovation system
 Enhance co-operation on IP policy among all
stakeholders to improve policy design

19. • Benefits of growth do not
automatically trickle down to
generate more equal societies
• Inclusive development is also
important for policy agendas
as inequalities can negatively
affect growth
Knowledge and Innovation for
Inclusive Development
→ Innovation policies have been examined to date essentially
with regards to their impact on the growth of
aggregate income – what about impacts on inequalities
(distributional impacts)?

20. Summary of Project Framework
Territorial Inclusiveness
(Places)
Social
inclusiveness
(People)
Industrial
inclusiveness
(Firms)
Policies
Characteristics
of the
Innovation
System
Distributional
Impacts
Policies
affecting mainly
industrial
inclusiveness
Policies
affecting
industrial and
social
inclusiveness
Policies affecting
mainly social
inclusiveness

21. “Islands of Excellence”
Source: EC (2011), “Monitoring industrial research: 2011 EU Industrial R&D investment Scoreboard”, European
Commission, Luxembourg; OECD (2012), OECD Science, Technology and Industry Outlook 2012, OECD, Paris.
Firm Sector of activity Economy
R&D
investment
(million USD)
Employment
(thousands)
1 Huawei Technologies Telecommunications equipment (9578) China 2392 110
2 PetroChina Oil & gas producers (53) China 1774 553
3 China Railway Construction Construction & materials (235) China 1407 229
4 Hon Hai Precision Industry Electronic equipment (2737) Chinese Taipei 1314 n.a.
5 ZTE Telecommunications equipment (9578) China 1188 85
6 Taiwan Semiconductor Manufacturing Semiconductors (9576) Chinese Taipei 1006 33
7 Petroleo Brasiliero Oil & gas producers (53) Brazil 980 80
8 Vale Mining (177) Brazil 867 71
9 MediaTek Semiconductors (9576) Chinese Taipei 789 5
10 Gazprom Oil & gas producers (53) Russia 781 393
11 China Petroleum & Chemicals Oil & gas producers (53) China 724 373
12 HTC Telecommunications equipment (9578) Chinese Taipei 438 13
13 Tata Motors Automobiles & parts (335) India 413 n.a.
14 CSR China Commercial vehicles & trucks (2753) China 366 80
15 Wistron Computer hardware (9572) Chinese Taipei 335 n.a.

22. Next steps in the project
• Global Forum on Development, 2 July 2014
– Debate how innovation policies can support developing
and emerging countries’ quest for competitiveness without
compromising industrial, social and territorial
inclusiveness
– Explore some concrete policy solutions to support
countries in reconciling their innovation and inclusive
development agendas
• High-level policy conference and report
– A publication will bring together the analysis and policy
recommendations and will be disseminated in various
ways, including at a conference in India (Q4 2014 or Q1
2015).

23. Looking ahead…
• How can OECD help Southeast Asian partners
boost innovative capacity?
– Country reviews of innovation policy
• Vietnam (release forthcoming)
• Malaysia (about to begin)
– IP framework case studies
• Indonesia
– Inclusive innovation
• Indonesia
– Statistics – regional network on S&T indicators?
• How can we best partner with regional
organisations with similar aims and
objectives?

24. Learn more and stay informed
www.oecd.org/sti/news.htm
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